Wall Street vs. Reality: Who Got 2025 Right?
Brian Seay, CFA | Capital Stewards
Every December, the financial world engages in a familiar ritual: the release of the "Annual Outlook." Major Wall Street firms, investment banks, and wealth managers (ourselves included) publish detailed reports predicting where the S&P 500 will end the following year, where inflation will settle, and whether a recession is imminent.
Now that we are closing the books on 2025, it is time to "keep the receipts."
In our latest episode of the Capital Stewards Podcast, I looked back at the forecasts made at the end of 2024 to see how they stood up against reality. The goal of this exercise is not to mock the experts. Rather, it is to demonstrate a fundamental investing truth: predicting the short-term future of the market is incredibly difficult.
Here is a look at what the experts got right, what they got wrong, and what it means for your portfolio.
The Economy: The AI Lifeline
Forecasting the economy is often easier than forecasting the stock market, comparing an oil tanker (the economy) to a speedboat (the market). The tanker turns slowly.
The Reality: Real GDP grew at roughly 2.1% year-over-year in the third quarter of 2025. On the surface, this looks like a "soft landing" or trend growth. However, beneath the surface, there was a massive divergence.
Almost all positive contribution to GDP came from the Artificial Intelligence (AI) CapEx build-out and consumer spending propped up by soaring tech valuations. Without the AI boom, the U.S. likely would have entered a recession. The "real" economy—Main Street businesses and the lower-end consumer—struggled significantly under the weight of high rates.
The Forecasts:
Goldman Sachs & JP Morgan: Generally accurate on top-line numbers (predicting ~2-2.5% growth). JP Morgan correctly identified the inflation variance caused by tariffs in the second half of the year.
Wells Fargo & UBS: These firms were too bearish, predicting "soggy" growth in the 1% range. They correctly identified the struggle of the real economy but underestimated the sheer scale of AI spending that kept the aggregate numbers afloat.
The Capital Stewards Take: We correctly predicted that there would be no recession and that the Fed might keep rates too high for too long. However, like many, we underappreciated the magnitude of the AI infrastructure spend.
The Stock Market: Defying Gravity
If economic forecasting is hard, stock market forecasting proved to be nearly impossible in 2025.
The Reality: The S&P 500 is currently trading around 6,820, up roughly 16% year-to-date.
The Forecasts:
Goldman Sachs & JP Morgan: Both targeted 6,500. They were close but slightly conservative. Their biggest miss was the "broadening rally" thesis; they expected non-tech stocks to catch up. Instead, AI hyperscalers continued to dominate.
Bank of America: The closest of the bunch, with a target of 6,666.
The Bears (UBS & BCA Research): Massive misses. UBS targeted 5,800, and BCA called for a crash to 4,452. Following the bearish advice would have cost investors significant capital appreciation.
International Markets: A major surprise was the outperformance of international developed markets and emerging markets (up 30%). Only Cambridge Associates and Vanguard correctly identified this opportunity.
The Capital Stewards Take: We were skeptical that the market could produce another year of double-digit gains, predicting average returns (7-8%). We were wrong—the market had legs, proving that even with high valuations, momentum can drive prices higher than expected.
The Surprise Winners: Bonds and Gold
The 2025 asset class story wasn't just about stocks.
Bonds: The Aggregate Bond Index is up 7%, a solid return. PIMCO correctly called for a strong bond year but incorrectly suggested bonds would outperform stocks.
Gold: The undisputed champion of 2025. While most firms predicted a 15% rise, Gold rallied over 50%. Conversely, firms like Fitch and HSBC predicted gold prices would drop.
The Lesson: Why Portfolio Construction Beats Forecasting
If the banks with the most data, the smartest PhDs, and the biggest budgets can’t consistently predict the future, what chance does the average investor have?
The varying success of these forecasts highlights why we don't build portfolios based on a "crystal ball."
As a fee-only financial advisor in Huntsville, Capital Stewards approaches this differently than commission-based brokers. We don't sell products based on "hot takes" or next month’s market prediction. We believe that relying on forecasts is a dangerous way to manage wealth.
Effective portfolio construction requires:
Humility: Admitting we don't know exactly what will happen next year.
Diversification: Holding assets that move in opposite directions. In 2025, you needed stocks for growth, but you also needed bonds for income and gold for the massive upside surprise.
Planning over Prediction: The success of your portfolio shouldn't be measured by whether you beat the S&P 500 this month, but whether you are on track to hit your financial planning goals.
Looking Ahead
We analyze these outlooks not to predict the future perfectly, but to understand the risk and return trade-offs. We want to know: What happens if the consensus is wrong?
As we move toward 2026, ensure your portfolio is built to withstand volatility and capture growth, regardless of which forecast turns out to be right.
About Capital Stewards Capital Stewards is a fee-only financial advisor in Huntsville, Alabama, serving clients locally and across the country. We act as fiduciaries, meaning we are legally obligated to put your interests first—avoiding the conflicts of interest common in Wall Street forecasting.
Stay tuned for the next episode of the Capital Stewards Podcast, where we will release our official 2026 Outlook.